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Compute the MIRR statistic for Project J if the appropriate cost of capital is 9 percent....

Compute the MIRR statistic for Project J if the appropriate cost of capital is 9 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project J Time: 0 1 2 3 4 5 Cash flow –$2,000 $650 $1,980 –$620 $600 –$200 MIRR % Should the project be accepted or rejected? Accepted Rejected

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Answer #1

Cost of Capital = 9%

Present Value of Cash Outflow = $2,000 + $620/1.09^3 + $200/1.09^5
Present Value of Cash Outflow = $2,608.74

Future Value of Cash Inflow = $650*1.09^4 + $1,980*1.09^3 + $600*1.09
Future Value of Cash Inflow = $4,135.69

MIRR = (Future Value of Cash Inflow / Present Value of Cash Outflow)^(1/n) - 1
MIRR = ($4,135.69 / $2,608.74)^(1/5) - 1
MIRR = 1.58532^(1/5) - 1
MIRR = 1.0965 - 1
MIRR = 0.0965
MIRR = 9.65%

So, we should accept this project.

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